Tax Structure in India

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About Tax Structure in India

The Republic of India has got a tax structure, which is quite simplified as well as developed. The taxation system in India is featured with a 3 tier federal structure that comprises of the following:
  • The Union Government
  • The State Governments
  • The Rural and Urban Local Bodies or Municipal Jurisdictions
According to the provisions of the Constitution of India, these three tiers are empowered with the imposition of the different duties and taxes, which are prevalent in the country. The Central Government is mainly responsible for levying Income Tax. However, they do not impose taxes on the income that is earned from agriculture. The agricultural income tax can be imposed by the government of a respective state. The other taxes that are levied by the Indian Government are mentioned below:
  • Central Excise Duty
  • Customs Duty
  • Sales Tax
  • Service Tax
However, the major taxes that are computed and imposed by the different State Governments within the boundary of the respective states in the nation are as follows:
  • Calling Tax
  • Entertainment Duty
  • Land Revenue (Generally levied on land, which is used for non-agricultural and agricultural purposes)
  • Profession Tax
  • Sales Tax (For intra-state goods' sale)
  • Stamp Duty (Duty levied on property transfer)
  • State Excise (Duty imposed on alcohol manufacturing)
The local bodies are vested with the power of levying the below mentioned taxes:
  • Consumption Tax
  • Octroi Tax
  • Property Tax

Changes in Tax Structure in India

Since the year 1991, the Indian tax system has undergone some significant changes. These changes were made in accordance with the country's W. T. O. commitments as well as the liberal financial policies. Some of the major changes in the structure of taxation in the nation are as follows:
  • Lowering the tax on corporate income
  • Custom duty rate varies from 0% to 150% with an average duty rate is 11.9%.
  • Toning up the administration of taxation
  • Widening the base of tax

Tax Structure for Different Taxes in India

Following are the structure of taxes for some of the main taxes in the Republic of India:

Structure of Personal Income Tax

The below mentioned table provides information about the different slabs for the imposition of income tax:
Sl. No.Total Personal IncomeRate of Personal Income Tax
1Up to INR. 2,50, 0000.00%
2INR. 2,50, 000 to INR. 5,00, 00010.00%
3INR. 5,00, 000 to INR. 10, 00, 00020.00%
4Above INR. 10, 00, 00030.00%

Structure of Corporate Income Tax

The imposition of such a tax varies from a domestic company to a foreign organization. Given below are the rates of corporate tax, which is levied on different companies:
  • Domestic Companies: Corporate Income Tax is levied at the rate of 30 % .
  • Foreign Organization (Including project offices or branch offices): Corporate Tax is calculated at the rate of 50 % .
However, an Indian registered organization that is a foreign company's subsidiary is considered to be a domestic company for the computation of corporate taxes.

Central Sales Tax

Popularly known as C. S. T., this tax is levied on the manufactured items at the rate of 4 %.

Local Sales Tax

Governed by the tax legislation of respective states of the India Republic, Local Sales Tax or L. S. T. gets levied on any kind of sale, which takes place in a state. This tax generally goes up to 15 %.

Excise Duty

For most of the commodities, which are subject to the imposition of Excise Duty, the rate of tax ranges in between 0 % to 16 %. The duty on some of the items goes up to 32 %. Those goods are air conditioners, chewing tobacco, motor cars, pan masala, polyesters yarn, soft drinks and tyres.

Custom Duty

Basic Custom Duty rates vary in between 0 % to 30 %.

Last Updated on June 15, 2015
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